Tech to the highest bidder: Kodak preps to peddle patents

Once the heavyweight of the imaging industry, Eastman Kodak Co. has fallen on hard times. It filed for bankruptcy earlier this year, and has a long road ahead as it works to emerge from bankruptcy protection. Along the way, some painful decisions have to be made, figuring out where the fat can be trimmed to create a leaner company that can survive unaided in a modern, all-digital world.

Just weeks after filing petitions with the U.S. Bankruptcy Court for the Southern District of New York, Kodak announced its exit from the camera business. Even before it entered bankruptcy, Kodak had also been looking to sell a significant chunk of its patent portfolio, and news reaches us today that it has asked the court for permission to proceed with a closed auction of some 1,100 patents in two key areas.

Of these, 700 patents will be sold in a Digital Capture Portfolio that the company says covers "key aspects of image capture, processing, and transmission technologies that are crucial to the design and operation of digital cameras and multi-function devices, including camera-enabled smartphones and tablets". The remainder will be bundled as a Kodak Imaging Systems and Services Portfolio covering "technologies including image analysis, manipulation and tagging, and network-based services, including image storage, access, and fulfillment".

A financial advisor to Kodak has spent the past year marketing both patent portfolios to a range of potential buyers, and Kodak now says that a total of 20 interested parties have signed confidentiality agreements in exchange for access to further information on the portfolios. The patents are said to have earned Kodak some US$3 billion or more in licensing fees from companies such as Samsung, LG, Motorola, and Nokia since 2001. A number of court cases are currently underway against companies alleged to have violated the patents, including Apple, RIM, and HTC.

Should Kodak gain the court's approval--as it apparently expects to happen early next month--the auction will take place in early August. Bidders will be kept private and their bids will remain sealed, something that Kodak says is "designed to allow bidders to give us their best offers without fear of showing their cards to competitors"--although of course, the process has also been designed to try and earn the best possible price for Kodak itself as well. Kodak currently expects the winner and their bid to be revealed publicly by August 13th.

Press Release

ROCHESTER, N.Y., June 11 -- Eastman Kodak Company today filed a motion seeking approval of bidding procedures for the prompt bankruptcy auction of its Digital Capture and Kodak Imaging Systems and Services (KISS) Patent Portfolios, comprising more than 1,100 patents that are integral to the capture, manipulation, and sharing of digital images.

Kodak’s motion outlines a sale process that is open to all qualified bidders subject to the rules of the bidding procedures. No disclosure of the unsuccessful bidders will be made to other bidders or the public. Only the winning bidder and the amount of the successful bid will be announced publicly at the end of the auction.

“The proposed structure of the auction is tailored to the special nature of the assets,” said Timothy M. Lynch, Kodak Vice President and Chief Intellectual Property Officer. “The bidding procedures are designed to allow bidders to give us their best offers without fear of showing their cards to competitors. In filing these proposed procedures in advance of the June 30 deadline in our lending agreement, we are moving ahead as quickly as possible with the process of monetizing our digital imaging patent portfolio.”

Over the past 12 months, Kodak’s financial advisor, Lazard, has conducted an extensive marketing process for these assets. To date, 20 parties have signed confidentiality agreements and have been provided access to an electronic data room.

Lynch noted that the two portfolios being sold have different characteristics and may interest different buyers. The Digital Capture Portfolio includes over 700 patents, covering key aspects of image capture, processing, and transmission technologies that are crucial to the design and operation of digital cameras and multi-function devices, including camera-enabled smartphones and tablets. The KISS Portfolio includes over 400 patents that cover technologies including image analysis, manipulation and tagging, and network-based services, including image storage, access, and fulfillment. Since 2001, Kodak has generated more than $3 billion from licensing its digital imaging portfolio to industry leaders, including Samsung, LG, Motorola, and Nokia, and is currently pursuing patent litigation against infringers that include Apple, RIM, and HTC.

Kodak expects the motion to approve bidding procedures to be heard by the Court on July 2, the auction to be held in early August, and the winning bidder to be announced by August 13.

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